Economics on the edge of chaos: Some pitfalls of linearizing complex systems

Les Oxley, Donald George

Research output: Contribution to journalArticlepeer-review

Abstract

We discuss some issues and challenges facing economic modellers when confronted with data generated within a non-linear world. The pitfalls associated with the linearisation of inherently non-linear models are raised and the concept of robustness defined and proposed as a necessary property of scientifically valid models. The existence of chaos in economic time series is discussed and an example, using financial data, presented.
Original languageEnglish
Pages (from-to)580-589
Number of pages9
JournalEnvironmental Modelling and Software
Volume22
Issue number5
Early online date20 Mar 2006
DOIs
Publication statusPublished - May 2007

Keywords

  • complexity
  • linearisation
  • robustness
  • structural stability
  • chaos
  • atractor

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